Steve Jobs, PCs, and the Incredible Opportunity in 3-D Printing

Three-dimensional printing sparked an explosion of excitement during 2012. The mainstream adoption of this technology led The Economist to predict a "third industrial revolution" and to envision the "factory of the future." The former editor-in-chief of Wired Magazineleft his post to become part of the "maker" movement he believes "will be bigger than the web." You can expect the hyperbole to continue.

But is it really hyperbole? Not too long from now we could be printing our own clothes, our own cars, even our own ears! New possibilities seem to pop up on a weekly, if not daily, basis.

As a result, separating a future reality from a pipe dream can be incredibly difficult. Even the stock market (or especiallythe stock market) has had difficulty evaluating the key players in this industry.

The chart below illustrates the market’s changing sentiment – from euphoria to anxiety – over the past year. After the share prices of the two largest 3-D printing companies, 3D Systems (NYSE: DDD) and Stratasys (NASDAQ: SSYS) , went on a tear during 2012, both companies watched their shares tumble, even after reporting impressive annual results. In investing terms, both of these stocks appeared to be "priced for perfection" at the start of 2013.

So, where do we look to gain a better understanding of 3-D printing's true potential? Perhaps we should recall a technology visionary of the past, who witnessed the transformative power of advanced machines firsthand.

In 1989, none other than Apple's young founder, Steve Jobs, described the effect of empowering individuals with new, advanced "tools" in a fascinating interview with Inc. magazine:

JOBS: You see, I think humans are basically tool builders, and the computer is the most remarkable tool we've ever built. The big insight a lot of us had in the 1970s had to do with the importance of putting that tool in the hands of individuals. Let's say that—for the same amount of money it takes to build the most powerful computer in the world—you could make 1,000 computers with one-thousandth the power and put them in the hands of 1,000 creative people. You'll get more out of doing that than out of having one person use the most powerful computer in the world. Because people are inherently creative. They will use tools in ways the toolmakers never thought possible. And once a person figures out how to do something with that tool, he or she can share it with the other 999.

Fast-forward 24 years, replace "computers" with "3-D printers", and it is easy to see how we could be on the cusp of a similar technological sea change. Steve Jobs, recognized by Inc. as the "Entrepreneur of the Decade" in the 1980s, had a knack for understanding how technologies might evolve, unlike skeptics who refuted the idea that everyone would need a PC in their homes. Similar naysayers exist today, questioning why ordinary households would ever require access to a handy 3-D printer.

Ironically, it is those ordinary households that will prove them wrong. Everyday hobbyists, or "makers" as they're often referred to, will show the world the true potential of 3-D printers, not necessarily the companies that manufacture them. Jobs elaborated on the importance of this concept as the interview continued:

INC.: That's a big idea.

JOBS: It's an extremely powerful paradigm. It's what has driven a bunch of us since this whole thing began to happen, and it hasn't changed. It hasn't changed for me since 1975. That's almost 15 years now. I believe this is one of the most important things that's going to happen in our generation. It would be easy to step back and say, "Well, it's pretty much over now." But if you look carefully, it's not over by any stretch of the imagination. The technological advances are coming at a rate that is far more ferocious than ever. To me, it's staggering to contemplate the tools we're going to be able to put in people's hands in the next few years—and I don't get impressed by this stuff so easily anymore.

So what we're doing here is driven by a fairly strong faith that people are going to continue to be as creative and as ingenious and as sharing with their results as they have been over the past 15 years. That sharing gives us a kind of leverage. For every improvement we can make in the tools we give people, we can improve the ultimate results even more, thanks to this leverage. That's what gets us so excited.

In all of my research around 3-D printing, I have yet to find an expert or CEO so vividly describe the possible evolution of this technology – and Jobs wasn't even talking about 3-D printers!

However, certain recent innovators have alluded to the idea of individual empowerment as a game-changer for 3-D printing. Fellow Fool Tim Beyers recently described his trip to tech conference SXSW, where Mary Huang, co-founder of 3-D printed design house Continuum Fashion, stated in a panel discussion: "If you give people the opportunity to be creative, they will surpass your expectations."

Huang's fashion company serves as a prime example of how 3-D printing can add value to goods that are often viewed as commodities. Shoes, jewelry, and apparel, for instance, are primarily manufactured in low-cost overseas countries. In the future, if customized manufacturing allows American companies to design and print these products in-house, this tweaks the cost-benefit equation. Why? Because these are precisely the types of goods that people might want or need to have personally customized for a perfect fit. The advantages of low-cost labor could be offset by the lower transportation costs and the ability to tailor to the customer's needs.

Innovative clothing companies like Nike (NYSE: NKE) recognize this opportunity. Nike is already using 3-D printers to craft high-tech football cleats, for example, in an effort to improve an athlete's initial acceleration during a sprint.

Shane Kohatsu, Nike's director of footwear innovation, noted that a 3-D printing laser technology referred to as Selective Laser Sintering (SLS) enabled new construction techniques that would otherwise not have been feasible: "SLS technology has revolutionized the way we design cleat plates – even beyond football – and gives Nike the ability to create solutions that were not possible within the constraints of traditional manufacturing processes."

Yes, the company Phil Knight started in the 1970s with his wife's waffle iron (to create the rubber sole in Nike shoes) recognizes the power of small-scale manufacturing. One can only imagine how much easier Nike's early days would have been with a 3-D printer instead of an old kitchen appliance!

Now, 3-D printers are just one of the tools in what the company fittingly calls the "Nike Innovation Kitchen". This is where Nike's investing in Flyknit, another technology that could allow for on-site manufacturing by "knitting" shoes from precisely engineered yarns. Expect similar advancements like Nike's to continue to spread and multiply over time.

Multiplying, in fact, is what 3-D printing is all about. This next iteration of highly advanced machines, when placed in the hands of hobbyists and entrepreneurs, will spawn entirely new industries. The way they use those machines will create a multiplier effect that will enhance productivity and allow creativity to flourish.

No one will deny that 3-D printing holds tremendous promise for manufacturing companies, but the real innovation will probably take place in our own garages and start-up labs. As MIT professor and 3-D fabrication expert Neil Gershenfield puts it: "These labs form part of a larger 'maker movement' of high-tech do-it-yourselfers, who are democratizing access to the modern means to make things."

If the "maker movement" sounds a lot like the "hacker generation" of the '80s and '90s, well, it should. The makers will go on to create the Apples and Microsofts of future generations. Now that the means of production exist at our fingertips, barriers to entry are disappearing fast. What Steve Jobs described as a "paradigm shift" in the PC era will likely unfold as a radical manufacturing transformation in the next decade.

For investors interested in the 3-D printing arena, be sure to differentiate between the hype surrounding the technology and the fundamentals of the publicly traded companies. Easy to use hobbyist machines, like those sold by 3-D Systems, will allow everyday folks to innovate in ways we cannot currently imagine – this potential is what would excite a visionary like Steve Jobs.

However, while consumer devices could unlock tremendous value for society, investors need to find the companies that stand to capture some of that value, while constantly innovating. To better understand the company that ushered in the 3-D printing revolution, my colleague and I compiled a special premium report on 3D Systems. In our report, we take a close look at 3D Systems' opportunities, risks, and critical factors for growth. You'll also find reasons to buy or sell the stock today. To start reading, simply click here now for instant access.

Isaac Pino, CPA has no position in any stocks mentioned. The Motley Fool recommends 3D Systems, Apple, Nike, and Stratasys. The Motley Fool owns shares of 3D Systems, Apple, Nike, and Stratasys and has the following options: Short Jan 2014 $36 Calls on 3D Systems and Short Jan 2014 $20 Puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Speaking of incredible opportunities, what about bio-printing companies, like Organovo? Is this technology too new, or too difficult to analyze - or is there other reasons not to focus on this growth potential?

Am I the only one who thinks this is arrant nonsense? I see no reason to spend hours printing a plastic cup or another throwaway thingamajig when the same things can be manufactured in China at a fraction of the cost. Those who hype 3-d printing tend not to mention that complete useful objects usually require unprintable parts and assembly with specialized tools -- not something most individuals are able to do. Besides, the future is not in physical things, but in data processing and virtual reality. Why would you need a plastic fork after your mind has been uploaded to the global net?

These "plastic toy" making machines are only good for casting a one off mock-up of the plastic bits which cover the outside of an intended new product. You cannot print/spray on the guts of a complex product.

corporate america has sold millions of quesadilla makers, margarita blenders and hot dog steamers. if you honestly think home 3d printers won't have their day, you severely underestimate americans desire to spend money.

I agree that the possible potential of this technology is stunning, however, thast said, the emphisis is on potential.

It is reasonable to believe that it will lead to a new and possibly very large industry but it is also likely that the inventors and designers of the original tools will not be the ones to share in the returns from that industry. Rather it will be the users not the makers.

It is also necessary to take a large dose of reality check. This will never replace the use of cheap labor to make items which require assembly in large quantities.

You guys need to give it a rest with overhyping 3D systems. The tone of the articles has not changed from the time the stock was at around $18 to the time it went near $70 and then dropped again. While the argument can be made for DDD being a good company, completely disregarding the price in the recommendations creates an impression that the authors of all these articles are either complete amateurs or charlatans. For the stock price of a company with around 20% organic annual growth to skyrocket by 200% in about a year HAS to raise some questions about whether or not the current price is a good entry point and about how much hype is built into the stock price. Yet the articles continue unabashedly pounding buy buy buy with little to no attention to fundamentals or price. It makes you guys look like fools, without the capital F.

The potential for creativity through 3D printing is incredible and people given the tools will create in ways that yet have not been thought of. With the way technology has enabled communication advances, medical advances, etc. 3D will be moving our abilities in directions we cannot foresee. One thing I can see, however, is that parts for broken machines will be able to be manufactured and the presently irreparable (because of parts not being available due to obsolescence or otherwise) can be repaired and functioning again, often quickly. Productivity could be restored in less than the time it would take to have parts shipped and installed in a broken machine. Investing in 3D if done prudently, should pay off handsomely for those who invest, but we should not ever expect to see impossibly great returns over a long period of time in this or any technology.

The more I read about the Motley Fool the more sceptical I become. I will be cancelling my free thirty day free membership. They do not appear to have the answer either. After looking into their mutual funds it really hit home with me. They dont appear to practice what they preach. I may be wrong though and will give it one more week for them to prove themselves.

I had the opportunity to work with an earlier version of one of these machines a few years ago. I considered buying one to play with, but didn't; there were more pressing business areas to put my capital.

Today, my son's employer has several. But to put this into perspective that company also has hundreds of various machine tools in multiple manufacturing plants.

When these machines first came out, they were used for "rapid prototyping" but the real goal is "rapid manufacturing" in which products can be moved from concept through design to the shipping dock in very short order. Also of interest are "short runs" of thousands and the ability to switch between different products very quickly.

I wouldn't underestimate the potential, but it is important to realize the limitations. Just as sintered metal parts are not suitable for all metal fabrication, so too with these.

Of course, these machines are also competing with low cost human manufacturing.

When I see a major toy manufacturer spinning a significant percentage of their plastic parts, then I'll say "it really is coming."

However, I'm of the opinion this is still in the early stages of development and deployment.

Here's a thought to consider. At one time, there were supposedly a thousand automobile manufacturers in the U.S. I suspect there will be fallout in this area also, and it's possible a Tesla type company will spring up and take the lead.

I suppose you were jesting (being fools) when you said cars. DDD cannot even make a toaster! It is only good for resins and plastics. If you wnat to make more Lego for your kids it will do that very well

Its relatively fast to get a prototype, think same day or same week and revisions just as quick, but expensive as a manufacturing method. I always wanted a small lathe and milling machine, but this will do the job from softer materials.

Will there be a home market for these? I could see using something like this to print Molly Bolts or a million other small household items. As well as making a custom item that suits a particular need at your house, whether it be to hang a photo or mend a fence. What does one of these cost today and will they get cheap enough for home use?

I was attempting to make the point that this area is in early development, as was solar a few year ago, and automobiles a century ago. There were once far more automobile companies than there are today.

The point is, getting into some areas can be risky. Yes, some day there may be millions of these machines and even many in the home, just as some homeowners high high end color laser printers. But who will be standing?

Have you guys actually used one? Or seen them in action? I'm a student and have had to use our fabrication lab for one of our projects. My professor also had us go to the WESTEC trade show at the LA convention center. These two things opened my eyes to the potential of 3-D printing. Most of you guys probably have a narrow limit of creativity to so heavily bash 3-D printing

Both of you guys are great at speaking out of your ass. Obviously neither of you have seen 3-D printers in action, nor realize how fast the technology is growing. The detail capability on some of these machines are nearing nanometers. Especially the SLS machines. If you're going to find faults about a product, find real ones not made up limitations that you yourself came up with.

All this stuff was thought of light years before Steve Jobs or Star Trek. Now is the time to be a part of the future; but, remember 'Buyer beware'.

I do hold a number of companies that hold, use, or create 3D technologies.

My first look at this article, I thought the picture was a nice glass of water being filled from the refrigerator, then the NIKE shoes made 3D style, someone need to invent more stuff to create jobs for people to have to buy all the new things being made.

wmtworker- you must be a guy, have you ever heard women talk about how hard it is to get clothes that FIT? Printing your own clothes will be HUGE, and not just for Huge people.

I saw the Bosch prototype, and thought "Oh, time to buy more 3d stock-in all the 3d printing companies"

AND, on science Friday a few weeks ago, on three d printing, some high school girl called in and said they were using one in her school. she said they had made a bunch of custom key chains for their friends, THEN said they were working on a power generating wind turbine, and were using the printer to make the parts they designed to test and change their prototype. She said it had been very useful for that.

See the potential? Whats the market for every high school to get a 3d printer? What about when those kids hit the job/entrepreneurial market?

Is there a market for 3-D Printing at home? Maybe. It is like saying there is a market for the average consumer to have their own dry cleaning machine and sewing equipment. Why drive to the dry cleaners and pay someone $5-10 to do dry cleaning when you can buy the real thing for a couple of thousand dollars? Why ask someone to tailor your suits when you can buy an industry grade sewing machine for about $5000?

@squadus Your understanding and experience with 3-d printing appear to be quite limited, so it would behoove you to educate yourself. I have a 3-d printer within sight of my office and have used objects printed by it. Sure, I can print the tiniest cups and forks on Earth, but what does that buy me? Anything more than Lego blocks requires unprintable parts and assembly, most often necessitating specialized skills and custom tooling. Moreover, most useful objects also undergo testing phases that take additional training and equipment. China is quite safe for now.

I'm in the camp that 3 D printing will really explode at some point. Every time I pick up our local papers there's an article about a manufacturer finding a new use for the technology

And I too I am wondering about "Organovo" (ONVO). Seems like this 3-D bio-technology microcap would be the next frontier for 3-D printing. But maybe the company is just too speculative and small for TMF to write about. (I originally became interested in ONVO because a fund manager I really respect holds it in his portfolio.)

I am long on DDD and SSYS and think that the stock is at a really good value point for another buy. Am considering a purchase of ONVO.

Thanks for pointing out that Bill Bowerman actually used the waffle iron to create those early Nike sneakers, not Phil Knight. I'll fix that above. Here's an interesting article I came across on the discovery of the original waffle iron by the Bowerman family in a hole in the backyard in recent years (http://blog.oregonlive.com/behindducksbeat/2011/02/nikes_hol....

Crazy story, and that's awesome that you were coached by Bowerman as well.

@3Fairfield and helpisnowhere

Along with your interest in Organovo (ONVO), the bioprinting company, there are other Fools interested in the technology and we plan to have more coverage of the developments in that area in the near future. Thanks for furthering the discussion. Comments and insight from all angles on this new, exciting field are always welcome!

I just finished reading "The Davis Dynasty." For any Fool, I highly recommend it. The book reminded me that as exciting as 3D printing will be, keep in mind an essential of investing: valuation.

In 3D Systems and Stratasys to name two leading companies in the space, it's an exciting time. But it's important to step back and objectively evaluate the companies, their Price to Earnings and PEG ratios, and other important fundamentals of their financial performance.

Shelby Davis, the subject of the book I referred to above, was a brilliant investor, and passed along his life's lessons to two generations doing the same thing. David often shied away from hot stocks and technology wonders of the moment, and focused instead on companies in more boring industries, companies offering what was often more modest growth at much lower and sane PEs.

Over the years, many Nifty Fifty companies and next-great-thing technology wonders have come and gone (think Memorex or many early PC manufacturers), but a number of enduring companies whose stock is available at bargain prices often result in far greater returns over the long run.

Don't get me wrong. 3D printing has a great future for it. And I'm sure some investors made some quick profits on 3D Systems last year. but as an investor with a long-term outlook, I will patiently wait for 3D Systems to prove that its stock price can logically match its true intrinsic value. Until then, I will patiently hunt for real bargains of often overlooked companies with great long-term prospects. That's what Davis, Buffett, Graham and Lynch did with great success.